Broadgate: Market News 2/4
2 April 2013
Stocks fell on Monday in one of the lightest volume days of the year, pulling back after the S&P 500’s record closing high last week and after weaker-than-expected manufacturing data.
Apple was the biggest drag on both the S&P 500 and Nasdaq100, falling 3.1 percent to $428.91. Fidelity Contrafund, a $92 billion fund that is the largest active shareholder in Apple, reported that it cut its stake in the iPhone maker by 10 percent during the first two months of 2013.
Data showed factory activity grew at the slowest rate in three months in March, suggesting the economy lost some momentum at the end of the first quarter.
Recent data that has pointed to a strengthening economy has helped push stocks to record highs on both the Dow and S&P 500. The S&P 500 ended March with a record closing high and posted its best quarterly performance in a year, while the Dow broke into new record territory in early March.
“It was very difficult for the S&P 500 technically to break through that high level and to even close there, so it doesn’t surprise me that today is a down day,” said Brian Amidei, managing director at HighTower Advisors in Palm Desert, California. “I think there’s a lot of resistance at the 1,565 level.”
The benchmark S&P index remains below its record intraday high of 1,576.09. Moves may be limited this week in the absence of major catalysts before the closely watched U.S. monthly payrolls report on Friday.
The Dow Jones industrial average was down 5.69 points, or 0.04 percent, at 14,572.85. The Standard & Poor’s 500 Index was down 7.02 points, or 0.45 percent, at 1,562.17. The Nasdaq Composite Index was down 28.35 points, or 0.87 percent, at 3,239.17.
Volume was second-lowest of the year, with roughly 5.16 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT. That compares with the 2012 average daily closing volume of about 6.45 billion. Decliners outpaced advancers on the NYSE by nearly 7 to 3 and on the Nasdaq by nearly 3 to 1.
For the year, the S&P is up 9.5 percent, the Dow is up 11.2 percent and the Nasdaq is up 7.3 percent.
With the strong start to the year, many investors have been anticipating a pullback. Uncertainty over the economic future of Cyprus has weighed on stocks in recent sessions. European markets were closed on Monday for a holiday.
Among the day’s biggest gainers, Tesla Motors Inc surged 15.9 percent to $43.93 after forecasting full profitability in the first quarter, citing strong sales of its Model S sedan.
Decliners included Dell Inc, which warned that it would be dangerous to take on a lot of debt and remain a public company given its worsening profit outlook, in a sign that it views proposals from Blackstone Group LP and billionaire investor Carl Icahn as fraught with risk.
Shares of Dell dipped 0.2 percent to $14.30. Dell’s comments came on Friday, a holiday for U.S. markets.
In the day’s economic data, the Institute for Supply Management said its index of national factory activity fell to 51.3 last month from 54.2 in February. A reading above 50 indicates expansion in the manufacturing sector.
A report from the Commerce Department showed construction spending rose more than expected in February, gaining 1.2 percent, above forecasts of a 1 percent rise.
After the close, shares of BGC Partners (BGCP.O) were up 42.3 percent at $5.48 after news of the sale of its eSpeed platform to Nasdaq OMX Group (NDAQ.O).
Also, shares of health insurers rallied after the bell as planned cuts in U.S. government payments for private Medicare Advantage insurers did not materialize.
Shares of Humana, which derives about two-thirds of its revenue from Medicare Advantage business, rose 9 percent to $81.75 in after-hours trading.
The yen rose to a one-month high against the dollar early in Asia on Tuesday after softer-than-expected U.S. manufacturing data prompted investors to sell the greenback.
Further gains for the Japanese currency could be limited as investors wait to see exactly what the Bank of Japan (BOJ) will deliver at its April 3-4 policy meeting. The market has already priced in a lot of easing from the central bank making it hard for policy makers to surprise.
The dollar was at 93.22 yen, having fallen as far as 93.06. It has shed around 3.5 percent since peaking at a 3-1/2 year high of 96.71 on March 12.
The greenback came under pressure as U.S. Treasury yields slid after data showed factory activity grew at the slowest rate in three months in March. The report raised worries the U.S. economy is losing momentum due to government spending cuts.
The dollar index fell 0.6 percent, suffering its third biggest one-day fall this year, recoiling further from a near 8-month peak set just last week.
Thin market conditions, with most of Europe closed for the Easter holiday, contributed to a choppy session that saw the yen also rise against the euro and commodity currencies.
The euro traded at 119.81 yen after briefly dipping to 119.49, a low not seen since late February, while the Australian dollar was at 97.27 yen, having skidded to a four-week low of 97.02.
With the dollar under pressure, the euro drifted up to $1.2846, pulling away from a four-month trough of $1.2750 plumbed last week. Still, the common currency remained weighed by political uncertainty in Italy and worries about the region’s debt problem and dour economic outlook.
“As the fundamental outlook for the euro region turns increasingly bleak, the ECB remains poised to strike a dovish tone for monetary policy,” said David Song, currency analyst at DailyFX.
“We may see a growing number of central bank officials show a greater willingness to push the benchmark interest rate to a fresh record-low as the recession threatens price stability.”
The European Central Bank holds its policy meeting on Thursday, ahead of U.S. non-farm payrolls on Friday.
The Australian dollar also bounced up smartly from a one-week low of $1.0386 to $1.0425, but its immediate fortunes depend on the outcome of the Reserve Bank of Australia’s (RBA) policy meeting at 11:30 p.m. EDT.
The RBA is expected to hold its cash rate steady at a record low 3.0 percent, and the market is keen to see if it will drop its easing bias or keep the door open to more cuts.
Any signs the RBA has ended its easing cycle could give Aussie dollar bulls a green light to buy the currency.
“We expect the RBA to drop its easing bias, despite the high exchange rate, given the recent run of better data,” analysts at Barclays Capital wrote in a client note.
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